New York: Afghan President Ashraf Ghani has said he is "cautiously optimistic" about improvement in his nation's relations with Pakistan but said that sanctuaries toTaliban and other insurgents must end for peace to prevail.

"On Pakistan, I am cautiously optimistic that we began a process of fundamental transformation," Ghani said in response to a question during a talk at the Council on ForeignRelations here on Thursday.

He said Pakistan and Afghanistan have "defined" the problem that has plagued their relations for years.

"The problem is that Pakistan has been in an undeclared state of hostility with Afghanistan for 13 years. Fortunately, they have accepted this definition and we are working to end the state of hostilities," he said.

Ghani added that peace between Pakistan and Afghanistan is the "primary peace" and peace with the Taliban will then be at a national scale.

He also pointed out that sanctuaries in Pakistan for Taliban and other militant groups should be ended.

"Without sanctuary, a long-term rebellion is impossible. When sanctuaries end, peace breaks out. That is what happened in Central America and Latin America, that's what has happenedin Africa," he said.

Ghani attributed the transformation in relations with Pakistan to the "changing nature of the threats".

"Pakistan is now threatened" particularly after the tragedy of Peshawar in which the Pakistani Taliban attacked a school killing over 100 children, he said.

"Terrorists neither require passports nor recognise nationalities. We need to be able to deal regionally for stability and prosperity, otherwise we will all sink and I am hopeful we will have sufficient wisdom not to sink but swim together," he said.

Ghani added that when peace prevails in a country, its neighbours have as much as 1-2 per cent additional rate of growth.

In Pakistan, this would mean that 20 million people can come out of poverty, he said.

On the support Afghanistan has been getting from its neigbouring to build its infrastructure, Ghani said China and India are the two countries that have made significant investments.

China has promised 330 million dollars in grant which will be used for infrastructure, he said expressing optimism that Chinese investments will also soon flow into the country.

"We are looking at both countries (India and China) plus the Gulf," as Afghanistan builds its economy, he said.

The Afghan President also addressed students and faculty at Columbia University later in the day, focussing on leadership required to build a country and its citizens.